Unaudited Interim Results

Baring Emerging Europe PLC 07 May 2004 BARING EMERGING EUROPE PLC Unaudited Interim Report for the six months ended 31st March, 2004 STATEMENT OF TOTAL RETURN Six months ended 31st March, 2004 Revenue Capital Total £000 £000 £000 Gains on investments - 32,107 32,107 Losses on foreign exchange - (362) (362) Income 714 - 714 Investment management fee (554) (623) (1,177) Other expenses (339) - (339) Net return before interest payable and taxation (179) 31,122 30,943 Interest payable (14) - (14) Net return before taxation (193) 31,122 30,929 Taxation (68) - (68) Return attributable to ordinary shareholders (261) 31,122 30,861 Dividend* - - - Transfers (from)/to reserves (261) 31,122 30,861 Revenue Capital Total Return per ordinary share (0.59)p 70.16p 69.57p Dividend per ordinary share* -p -p -p * See note 1. STATEMENT OF TOTAL RETURN Period from 17th December, 2002 to 31st March, 2003 Revenue Capital Total £000 £000 £000 Losses on investments - (2,704) (2,704) Gains on foreign exchange - 66 66 Income 161 - 161 Investment management fee (235) - (235) Other expenses (120) - (120) Net return before interest payable and taxation (194) (2,638) (2,832) Interest payable - - - Net return before taxation (194) (2,638) (2,832) Taxation (13) - (13) Return attributable to ordinary shareholders (207) (2,638) (2,845) Dividend* - - - Transfers from reserves (207) (2,638) (2,845) Revenue Capital Total Return per ordinary share (0.46)p (5.88)p (6.34)p Dividend per ordinary share* -p -p -p * See note 1. STATEMENT OF TOTAL RETURN Period from 17th December, 2002 to 30th September, 2003 Revenue Capital Total £000 £000 £000 Gains on investments - 30,384 30,384 Gains on foreign exchange - 7 7 Income 2,283 - 2,283 Investment management fee (714) (329) (1,043) Other expenses (507) - (507) Net return before interest payable and taxation 1,062 30,062 31,124 Interest payable (1) - (1) Net return before taxation 1,061 30,062 31,123 Taxation (307) - (307) Return attributable to ordinary shareholders 754 30,062 30,816 Dividend (488) - (488) Transfers to reserves 266 30,062 30,328 Revenue Capital Total Return per ordinary share 1.68p 67.01p 68.69p Dividend per ordinary share 1.10p -p 1.10p BALANCE SHEET 31st March, 31st March, 30th September 2004 2003 2003 £000 £000 £000 Fixed assets Investments 142,605 81,020 116,548 Current assets Debtors 4,293 1,023 3,396 Cash at bank and in hand 6,847 4,649 - 11,140 5,672 3,396 Creditors: Amounts falling due within one year (6,440) (2,419) (3,500) Net current assets/(liabilities) 4,700 3,253 (104) Net assets 147,305 84,273 116,444 Capital and reserves Called-up share capital 4,436 4,488 4,436 Share premium account 1,411 1,410 1,411 Special Reserve 79,917 80,919 79,917 Redemption reserve 352 300 352 Capital reserve-realised 22,746 (1,083) 5,656 Capital reserve-unrealised 38,438 (1,554) 24,406 Revenue reserve 5 (207) 266 Total equity shareholders' funds 147,305 84,273 116,444 Net asset value per share 332.07p 187.79p 262.50p CASHFLOW STATEMENT Period from Period from 17th December 17th December Six months 2002 2002 to to to 30th 31st March 31st March September 2004 2003 2003 £000 £000 £000 Operating activities Investment income received 1,546 123 1,227 Deposit interest received 10 - 1 Investment management fees paid (432) - (638) Other cash payments (831) (23) (348) Net cash inflow from operating activities 293 100 242 Servicing of finance Interest paid (14) - - Taxation Overseas tax paid (68) (13) (307) Financial investment Purchases of investments (81,734) (16,585) (65,953) Sales of investments 90,934 21,850 66,420 Net cash inflow from financial investments 9,200 5,265 467 Equity dividends paid (488) - - Net cash inflow before financing 8,923 5,352 402 Financing Issue of share capital - 4,582 4,585 Buyback of ordinary shares - (5,355) (6,708) Net cash outflow from financing - (773) (2,123) Increase/(decrease) in cash 8,923 4,579 (1,721) NOTES 1. Dividend No dividend is payable in respect of the six months ended 31st March, 2004. Consideration will be given to an annual dividend in respect of the year ended 30th September, 2004 at a Board meeting to be held in November 2004. An announcement will be made shortly after that meeting. 2. Comparative information The figures and financial information for the period ended 30th September, 2003 are an extract from the latest published accounts and do not constitute statutory accounts. Full accounts for that year have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under section 237 of the Companies Act 1985. The accounts for the six months ended 31st March, 2004, and for the period ended 31st March, 2003 have been neither audited nor reviewed by the auditors. 3. Posting of Interim Report The Interim Report will be posted to shareholders on 19th May, 2004. It will not be advertised in newspapers, but copies will be available from that date at the Company's Registered Office at 155 Bishopsgate, London EC2M 3XY. CHAIRMAN'S STATEMENT The Company's net asset value increased by 26.5% during the six months ended 31st March 2004 and the share price by 31.6%, compared to a rise in the benchmark of 21.3%. Since the Company's launch on 17th December 2002 the net asset value has increased by 71.2% compared to an increase in the benchmark during the same period of 60.8%. This represents encouraging progress for your Company. The Board continues to monitor closely the market rating of the Company's shares. At 31st March 2004 the discount to NAV was 7.2% and averaged 9.1% over the six months. Iain Saunders Chairman 6th May, 2004 REPORT OF THE INVESTMENT MANAGER During the period under review (1st October 2003 to 31th March 2004), the net asset value per share ('NAV') of the Company rose by 26.5% from 262.5p to 333.1p. This compares with a rise in the benchmark of 21.3% in Sterling terms. Introduction The period under review saw low interest rates and an abundance of global liquidity. In this environment investors' risk appetite increased and Emerging markets were one of the main beneficiaries. In Emerging Europe we have seen significant 'cross-over-money' from Western Europe in particular targeting Central European markets. The investment case for equities was also supported by positive global economic developments. US GDP growth was strong and Asian growth, led by China, created strong demand for commodities with Russia being one of the main suppliers. Towards the end of the period however, there seemed to be increased investor awareness that amidst improving global growth interest rates cannot remain low forever. Russia Russia has been a strong performer during the period rising by 24.6%. The performance stemmed from three factors. First, the economy has been strong driven by high commodity prices and rising domestic demand. Secondly, domestic liquidity has been plentiful and finally valuations remained compelling despite the strong appreciation of the market. Economic releases from Russia continue to confirm robust GDP growth of 7.3% in 2003. The strong export performance resulted in rising trade and current account surpluses and in turn added to domestic liquidity. Although the market was strong during the period, this has not been without some volatility. A notable setback was caused by the arrest of Michael Khodorkovsky, the then CEO of Yukos. The market initially suffered a crisis of confidence, as it was feared that this could reflect a desire by President Putin to review past privatisations. It became apparent however, that the Kremlin only wanted to reassert its power over the Oligarchs. On the political front both the Duma and presidential elections have occurred during the last six months. The outcome has been the election of a pro-Kremlin compliant Duma and the re-election of President Putin for a second term. Putin has appointed a reform minded Government. The investment strategy has involved adding to the oil sector exposure. We believe that oil prices can remain stronger for longer and ahead of current market expectations. In addition, the Company's weighting in Russia continues to reflect the theme of the improving domestic economy, not least via the mobile telephone companies that are continuing to add subscribers faster and more profitably than the market expected. Turkey The positive economic trend that began during the end of the previous reporting period continued. The AKP ruling party began to deliver a steady flow of fiscal successes and positive economic data releases. Inflation has been brought under a degree of control. In March the Consumer Price inflation fell to 11.8% year on year, Interest rates fell accordingly. After a long absence from the market a significant position in Turkish equities has been built up as we are confident that the positive economic and political momentum can continue. Central Europe The Polish market was the weakest performer in Central Europe even though the economy finally displayed signs of sustained recovery driven primarily by exports helped by a weak Zloty. Domestic consumption began to pick-up as well. However, market sentiment was dominated by political events. The ruling SLD party consistently lost support. This made it very difficult for the Government to pass the reforms necessary to reduce the growing fiscal deficit. We have positioned the Fund very defensively in this market. The Czech Republic has been relatively buoyant over the period reaching new highs. The economic environment has improved. Not only has domestic consumption remained strong, but also the likelihood of deflation, a risk for most of 2003, has dissipated with four consecutive months of price increases. While we recognised that the market offered value the Fund has remained neutral for most of the period because of more attractive investment opportunities elsewhere in the region. Hungary has on the other hand been quite volatile. Macroeconomic uncertainty epitomised by a ballooning budget deficit led to the sacking of the Finance Minister Mr Csaba Lazlo, and a sharp depreciation in the currency, reaching all time lows against the Euro at HUF272.50. The markets have reacted positively to the plans of the new Finance Minister, Mr Tibor Draskovic, who is now targeting a budget deficit of 4.6%. Over the period the Fund has been underweight. Conclusion The long-term investment case for the region remains strong. Russia is well positioned to benefit from increasing Asian demand for commodities. In Central Europe a new phase of convergence has begun where countries will benefit from significant flows from EU funds e.g. for the development of infrastructure. In Turkey we expect the momentum of the economic recovery to continue not least because the Government has sufficient support to remain committed to the IMF programme. On a short-term basis selective stocks have appreciated sharply on the back of significant fund flows into the region. In such cases we are looking to take some profits at current levels. Baring Asset Management Limited 4th May 2004 M. J. Nokes Secretary 6th May, 2004 155 Bishopsgate, London, EC2M 3XY 020 7628 6000 This information is provided by RNS The company news service from the London Stock Exchange

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